Management Liability - It’s not clear by the title what this insurance covers and most businesses we speak to don’t know what it is, or if they have it!
It’s not clear by the title what this insurance covers and most businesses we speak to don’t know what it is, or if they have it.
Directors’ duties are vast and a breach can have significant consequences, especially when they can be held accountable to their own personal wealth.
But its not just “directors” who should be considered in this insurance - it’s non-executive directors, defacto directors and senior management who make decisions on behalf of the business.
You don’t have to get something wrong to be accused of wrongdoing.
Having management liability in place could be the difference between you defending a claim, together with the time and money that it takes or passing it to an insurer with experienced claims handlers and solicitors to manage it on your behalf.
Claims are generally taken against directors and against the business at the same time as it increases chances of success for the claimant. This means having 2 actions to defend.
An optional extension to the policy is Employment Practices Liability – there to protect businesses against employment law claims.
Why is this not covered by other policies?
Legal expenses – this covers preset scenarios with a success clause i.e. the insurer will only take it on if there is a 51% chance of success
Professional indemnity – you have to have caused someone a financial loss as a result of your advice or design. Management liability doesn’t have this trigger.
Here are some claims examples:
1. Claim against a director:
An organisation was asked to submit evidence for, and attend at, a public inquiry for its goods vehicles operator’s licence. The claim fell under the company insurance investigation section for regulator costs of £250,000. Specialist transport lawyers were appointed to defend the position of the insured organisation at a cost of over £30,000.
2. Claim against a business:
Natural Resources Wales investigated an organisation for allegedly processing some of their products without a permit. Despite having already checked that the products in question did not actually require a licence, the investigation proceeded and had to be disputed. There was no finding against the organisation but almost £200,000 of costs were incurred in the filing of a defence.
3. Claim against a director and the business:
A member of the public was involved in an incident with operatives of the insured organisation and some weeks later died in hospital. The file was closed as there was considered to be no fault. However, following the Coroner’s investigation, the Security Industry Authority (an executive non-departmental public body, sponsored by the Home Office) separately investigated the certification status of the insured organisation. Defence costs of £25,000 were incurred.
4. Claim against a trustees and directors:
Five trustees and board members were accused of manipulating grant awarding processes and of the misappropriation of funds. No gain could be established but it was alleged that grants were given for non-qualifying properties and that close acquaintances were being used on the contracts. Two trustees pleaded guilty whilst the remaining three were cleared, but the court concluded that no employee personally benefited from missing funds. The costs of the claim were £230,000.
5. Claim against directors:
Investors appointed consultants to evaluate the potential purchase of a business. It was alleged that the consultants gained knowledge of negotiations and valuations as a result then they withdrew their retainer and services. The business was then bought for a fractionally higher amount by a fellow group company of the consultants. The investors claimed against the directors for breach of the contractual and equitable duty of confidence in allowing the associated business to access confidential information arising out of the retainer. Directors were also accused of breaches of fiduciary duties and unlawful means conspiracy. Total claim costs were in excess of £1,000,000.
If you have this cover but you are not sure why, let’s have a chat about it. We want to make sure you know how you are protected and would hate for you to have a valid claim and miss out on getting the help from this policy.
If you do not have this cover and want to speak about it in more detail and find out how much it costs, please contact us.
Squared Insurance Brokers Limited
0141 737 7770